Tax changes for 2018: What you need to know

As the Trump administration and GOP lawmakers work to complete a tax reform overhaul by year’s end, the Internal Revenue Service (IRS) released some cost-of-living changes that will go into effect beginning next year.

Individuals who pay into to a variety of savings plans, including a 401(k), 403(b), Thrift Savings Plan or most 457 plans will be able to contribute an extra $500 per year. The contribution limit for these plans will jump to $18,500 from the current level of $18,000.

IRA

These are the updated phase-out ranges for IRA contributions in 2018:

For individuals covered by a workplace retirement plan: $63,000 to $73,000.

For a married couple, the range will be $101,000 to $121,000 if one spouse is covered by a workplace retirement plan. This is an increase from the current $99,000 to $119,000 limit.

For a married couple where neither individual is covered by a workplace plan: $189,000 to $199,000.

The deduction is phased out between $0 and $10,000 for a married individual filing a separate return who is covered by a workplace retirement plan, unchanged from previous years.

Roth IRAs

The phase out ranges for those making contributions to Roth IRAs are as follows:

The amount of tax-free money individuals can deduct from their income each year for every taxpayer and dependent claimed on their return is also set to rise by $100 to $4,150. The phase out begins at $266,700 for individuals and $320,000 for married couples filing jointly. The personal exemption phases out completely at $389,200 for individuals and $442,500 for married couples filing jointly.

Itemized Deductions

The limitation for itemized deductions for individuals will begin at $266,700. For married couples filing jointly, the limit starts at $320,000.

Alternative Minimum Tax

For the coming year, the alternative minimum tax exemption amount is $55,400 and the phase out begins for individuals with incomes of $123,100. For married couples filing together, the exemption will be $86,200 and will begin to phase out at $164,100.

Top Income Rate

The top income tax rate of 39.6% will apply to individuals with incomes higher than $426,700, or $480,050 for a married couple filing jointly.